Released each month by the Federal Reserve Bank of New York (FRBNY), the Survey of Consumer Expectations sheds light on the level of optimism Americans feel about their future household finances. Many economic surveys tend to focus on current, or shorter-term, levels of consumer sentiment. But the FRBNY’s survey provides key insight on how consumers project the well-being of their household finances, the labor market and inflation over the next 12 months.
Overall, Americans remain fairly optimistic on the state of the U.S. labor market. Just 34.6% think the national unemployment rate will move higher over the next 12 months, nearly matching a three-year low. Moreover, Americans say their perceived probability of losing their current job over the next 12 months is just 11.9%. This is the lowest reported level over the past 13 months.
Regarding household finances, Americans’ sense of optimism is a bit mixed. 36.2% believe they will be either much better off or somewhat better off financially one year from now. 43.9% say they expect their financial situation will be about the same. Finally, 19.9% expect their financial situation will be either much worse or somewhat worse one year from now.
American households also believe their incomes will grow at a slower pace in 2025. Over the next 12 months, Americans project their household income will increase by just 2.8%. This is the lowest projected growth rate since May 2021. Americans also expect they will temper their household spending. Over the next 12 months, consumers say their annual spending will increase by 4.8%, a three-year low.
By far the biggest concern for Americans, however, is inflation. Over the past three months, inflation has reignited and has been trending higher. In December, according to the Consumer Price Index, consumer prices rose another 0.4%, matching the highest monthly increase in 16 months. The national rate of inflation also rose from 2.7% to 2.9%, a five-month high. Core inflation, which strips out the more volatile and seasonal food and energy prices, was reported even higher at 3.2%. Over the next 12 months, most Americans expect inflation to remain around the 3% level.
With President Trump now in the White House, there will be a lot of new economic policies and priorities. Trump has already promised an aggressive agenda on taxation, energy, trade, deregulation and even the size and scope of the federal government. Former President Biden’s Achilles’ heel within the economy was inflation – a lesson Trump should not forget. Yes, Trump has grand ambitions. But across the nation at family kitchen tables, Americans continue to say that rising consumer prices remain their top priority.
